Canadians should not expect much of a raise next year

By Andrew Rickard | September 27 2016 11:30AM

Photo: Freepik

Amid economic uncertainty, employers do not plan to raise wages much next year. The good news is that there will be fewer pay freezes, and there is also money available to compensate top performers.

According to a poll released by Aon Hewitt yesterday, salaries in Canada are expected to remain mostly flat next year. The benefits consulting firm contacted 347 companies for its annual Canadian Salary Increase Survey, and found that they expect base pay to increase by 2.8% in 2017, up slightly from the 2.6% recorded in 2016 (this amount includes salary freezes and pay cuts).

4.5% of employers froze salaries in 2016

While the research shows that 4.5% of employers froze salaries in 2016, partially because of the slowdown in the energy sector, only 0.4% of companies overall expect to freeze salaries next year. The oil and gas, banking, and transportation and logistics sectors will see lower than average increases of 2.2%, 2.3%, and 2.1% respectively. On the other hand, workers in the automotive and auto-supply, chemicals, consumer products, and life sciences sectors may expect their paycheques to increase by 3.0% next year, and high-tech and professional services companies may also look forward to a pay bump of 2.9%.

An average merit increase of 4.4%

Last year, Aon Hewitt notes that Canadian employers put a premium on performance and allocated more money to their top employees who received an average merit increase of 4.4%. Overall, nine out of 10 of the respondents had variable pay plans and offered bonus payouts. The trend towards performance-based salary differentiation is expected to continue in 2017, with average merit pay for top employees rising by 4.6%, compared with a 2.7% merit increase across all employee groups.

“While the overall job market may be strengthening slowly, competition for high-performing employees remains high,” says Suzanne Thomson, Senior Consultant, Global Data Solutions at Aon Hewitt. “In order to win the competition for top talent, organizations are continuing to differentiate compensation through variable pay programs.”